Startup Manufacturing Company

You are the CEO of a start up manufacturing company. The company makes high quality upholstered furniture. Your target market is young professionals.

Your first objective is to locate a supplier of the fabric used on to upholster the furniture. There are two potential suppliers that make fabric suitable for your operation.

Supplier #1 . This supplier is located in North Carolina and has been making cloth for over 100 years. Because it is an old company, change comes to it very slowly. It only produces a limited line of upholstery grade cloth. Orders for special designs take six months to ship from the factory. However, pricing for both standard and special cloth is well within your budget. The quality of the fabric produced by this supplier is considered normal for the industry. The firm lacks the technical expertise to produce the newest and latest designs, especially in the specialty fabric market.

Supplier #2. This supplier is a new company located in South Korea. The company offers a full line of upholstery grade fabric. Specials are not a problem and are shipped within 3 weeks of receipt of order. Pricing, however, is almost double the price of cloth from supplier #1. The quality of the product is considered the best in the industry. The firm has the latest technical expertise and can produce any design the customer requires.

Your second objective is to prepare a forecast for the next 12 months. It is important that your forecast matches up with the capacity of your manufacturing facility. On average the plant operates 8 hours per day 5 days a week with a two week shut down in July for annual maintenance. On average it takes 1.25 hours to make a piece of upholstered furniture. The company currently has 5 upholstering machines. A steady rate of manufacturing throughout the year is critical to the operation of the facility. Sales of upholstered furniture are seasonal with 70% of sales occurring in the winter and spring. 605 of annual sales are upholstered chairs. Sales are expected to by 7,800 units annually.

Your final objective is to assure that everything you need to make the product is there when it is needed. To accomplish this you decided to use MRP. A multilevel bill of material for a basic upholstered chair is as follows:

Midterm Project Assignment

Your assignment is to prepare a written presentation to the board of directors of the company. The presentation must address in detail how you plan to address the following:

1. Vendor Selection: Which vendor(s) would you select and what is your justification for the selection?
2. Forecast: Make a sales forecast by month taking into consideration the seasonality of the upholstered furniture sales.
3. Capacity: Does the factory have enough upholstery machines to meet the expected demand? What would be the monthly production rate?
4. Bottleneck: How much would a bottleneck in the final assembly affect delivery if the bottleneck causes a reduction of two units per shift?
5. Bill of Material: (A) Using the above product tree determine how many units of component are required to make 1,000 finished items. (B) Assume the following inventory of components is currently on hand. How many of each component will be required to make the 1,000 units?

Product 1 – 100
Component A – 250
Component B – 300
Component C – 100
Component D – 500
Component E – 250
Component F – 1000